Growers ponder the future of CBH

Growers ponder the future of CBH


Agribusiness
Kallum Blake

Kallum Blake

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AS CBH meetings get underway this week across the State to get feedback on the co-operative's future direction, opinions from growers are mixed.

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AS CBH meetings get underway this week across the State to get feedback on the co-operative's future direction, opinions from growers are mixed.

When Farm Weekly spoke to growers about the proposed changes, views were divided on whether CBH should move from its current non-distributing co-operative structure to potential commercialisation.

Last month CBH sent its structural and governance review document to 4200 grower members, with an additional 2500 people visiting the CBH's website as a precursor to the 24 grower meetings to be held over the next two weeks.

As part of the $2 million review process, CBH has engaged the consultancy services of Deutsche Bank, PWC, King and Wood Mallesons and Churchill Associates, as well as seeking advice from international co-operative specialists to test the advice from the consultants.

This week, the first round of grower meetings began across the Esperance, Albany and Kwinana zones.

The first meeting held in Brookton on Monday morning had 30 growers in attendance, with most questions and discussion centred around changes to CBH's structure.

Meetings are to be held in the Geraldton zone next week at Northampton, Mingenew, Perenjori and Coorow.

Meetings held prior to the booklet's launch attracted 900 growers and feedback was used to develop the booklet.

Similar numbers are expected to attend the latest round of meetings to learn more about the options around CBH's structure and potential governance changes, which include changes to the board's election process, board diversity and skill set as well as duration on the board and zones.

Following the meetings the board will respond to grower feedback by December and put forward recommendations in 2017.

Any changes made to the structure and major governance changes to the co-operative require a member vote and 75 per cent acceptance, while minor changes to governance will need a majority vote by the board.

For Kallum Blake, keeping CBH as a non-distributing co-operative is a "big advantage"for young growers starting out.

Mr Blake farms with his parents near Katanning and said he was "pro-co-op".

He said the tax exemptions and lower storage and handling fees were key reasons for him wanting CBH to remain as a co-operative.

"I think when people say "we want CBH to deliver value", I say it already is," Mr Blake said.

“For those wanting to ‘sell out’ and list it - I think it is pretty selfish. For all those years they have had a fee for service - that doesn’t mean they own it.

“I know the idea does appeal for those wanting to retire, but it will make it harder for the next generation.

Mr Blake said from discussions he had with other members still supported a co-operative as offering “the best model for efficiency in storage and handling”.

He said while he would consider “breaking out” the processing and trading arm of the business or subsidiaries such as Blue Lake Milling, the administrative costs would “erode any benefit” from changing the structure.

WILLIAMS grower Mark Fowler believes that some of the dissatisfaction surrounding CBH could be solved through its governance review and not by structural change.

The governance review, which had been considered the “second cousin” to the structural review, is giving CBH members the opportunity to make changes to board structure, director eligibility and experience and elections.

Mr Fowler, who farms with parents Doug and Jenny and wife Letisha, said he was primarily concerned that a change to a corporate structure could mean that the board would, as a matter of law, be required to maximise profits rather than act in the interests of its grower members, as is currently the case.

He pointed out that there are many things that the cooperative currently does that a company cannot and will not do because such measures do not maximise profits.

He is particularly concerned that a profit maximising CBH would have few controls over the rates it charges for the use of it near monopoly assets. He cited, as examples of this, the explosion in storage and handling charges in the Eastern States post-corporatisation and of the situation with Brookfield and its pricing of grain on rail.

He noted that changing from a non-distributing cooperative would likely lead to the loss of income tax and local rate exemptions, loss of port exemptions and generally increased scrutiny from the ACCC.

He said a move to a listed company would mean a “quick buck” for some, but would adversely affect growers in the long term. He also believed that the AGC proposal would significantly dilute grower equity given the discounts, bonus issues and options available to its founding shareholders and cornerstone investors.

“There is a view by those wanting to corporatise that CBH should be the best it can be as a business; I want a service that will be efficient, sustainable and cost effective to me as a grower in both the short and long term, and anything else is secondary in importance.”

He said he would prefer to see changes made to the co-operative’s governance, rather than a structural overhaul.

“I am open to a change to the ‘one grower - one vote’ concept as well as having the discussion around director eligibility and qualifications.”

*Mark Fowler's comments are a corrected version to was was published in the September 1 edition of the Farm Weekly.

A MOVE to a publicly listed CBH would see the company’s shares being the second biggest asset on the balance sheet for Cunderdin-Meckering grower John Snooke, based on the $2.65 billion value estimated by financial services firm Patersons.

“I think this value is still quite conservative and believe there is more upside considering estimated size of this year’s crop,”he said.

“If we stay the same, we can’t take advantage of any of this.”

After looking through CBH’s structural and governance review booklet released on August 15, Mr Snooke said he was “quite disappointed” that the document wasn’t as independent and unbiased as he was led to believe in earlier reports prior to the booklet’s launch.

“They struggled to explain on the point of value and still won’t attach a value on what they believe the co-operative is work if we decide to corporatise,”he said.

“As a business owner I need to reconcile the on farm value that CBH delivers to my business - and they still can’t tell me that.”

“If we aren’t being given all the information, we ruin the risk of making poor business decisions.”

He said he was disappointed that growers had not been allowed to vote on the Australian Grains Champion proposal earlier this year.

“What I have found when talking to people is there is a big middle ground in which direction we need to take CBH.

“There is about 5-10% who are vehemently opposed to any change, but there’s a large number who want the information so they can make a sound business decision.”

He said if CBH were to become a publicly listed company, the shares would become part of a “legacy portfolio”.

“We would retain our CBH shares like we’ve kept our Wesfarmers shares since they were listed in 1984 - they would be a valuable part of our business.”

WITHIN the Marshall family, opinion varies widely as where they want to head CBH in the future.

Ray, brother Les and Ray’s son Andrew run ‘Dutarning’ - a mixed cropping and sheep enterprise east of Pingelly.

For Ray, he wants to see CBH become more competitive to allow WA farmers to be more competitive in global markets.

“CBH is the mirror for WA farmers, so if they aren’t competitive, neither are WA farmers,”he said.

“If we had kept the same farming practices 10 years ago, we wouldn’t be here any more. CBH also need to change to keep up.”

Rather than move to a distributing cooperative or publicly listed company, Ray said CBH needed to be “more frugal” in its operations.

“CBH need to close 100 bins and they also don’t need all those people - with technology advancements farmers can run their farm from an iPhone. CBH should look into using technology better.”

A reduction in storage and handling fees will also allow growers to be more competitive, particularly with the current depressed grain prices.

“Last year CBH had a profit of almost $100 million - instead of rebates why can’t we just see cheaper handling and storage rates?”

“A $5-10/tonne cheaper fee is better in our pocket and doesn’t have the tax implications of rebates.”

However, Ray said the Australian Grains Champion (AGC) “deserve an Olympic gold medal” for bringing the issues surrounding CBH’s performance and structure to a head.

“It is good that they got growers and the Board thinking about the issues and sitting down that working out that there might be a better way,”he said

“But as mid-range growers who grower 4-7000 tonnes, the AGC offer wasn’t good enough,”he said.

“The offer of $2.56 billion based on a 12million tonne crop is too low, considering that this year we are looking at a 16-17million tonne crop.”

While Ray is leaning towards keeping CBH as a co-operative, son Andrew would rather see the co-operative corporatised.

“I’m all for corporatising CBH,”Andrew said.

“I want to release the value in CBH so the equity can be used on our farm.”

“I think the AGC proposal is pretty good but it needs more scrutiny and we won’t know what CBH is worth until its listed.”

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